If Hong Kong feels the Bern: What a Sanders presidency means for HK

With the field of Democratic and Republican presidential candidates narrowing in the aftermath of the Iowa caucus and New Hampshire primary, Harbour Times begins a series of candidate profiles and what the candidate’s election as president might mean for Hong Kong.

Editor’s Note: This article was updated on February 15th, 2016 to include the penultimate paragraph about FATCA.

Candidate for the Democratic presidential nomination Senator Bernie Sanders of Vermont is no stranger to policy debates even if large numbers of voters are first learning about him during the primary season. Sanders served from 1991 to 2006 in the House of Representatives as Vermont’s sole representative, and subsequently as Vermont’s junior senator to the liberal champion Patrick Leahy, who has served as Vermont’s senator since 1975. Based on the support Sanders received in the Iowa caucus and New Hampshire primary, he is becoming more competitive against former first lady, senator and Secretary of State Hillary Clinton.

Bernie who?

At times a socialist, now a self-described “democratic socialist”, and for most of his Congressional career an independent, Sanders typically votes with the Democratic members. During his presidential candidacy, he has argued for policies that he believes will help America’s middle class. Despite his socialism, plenty of Democratic senators spend the taxpayers’ money more enthusiastically than Sanders; in 2011, Sanders was only the 55th spendiest senator, while the American Conservative Union rated 11 senators more liberal than Sanders in 2008.

If Sanders is elected, Hong Kong will, without a doubt, “feel the Bern”

Sanders’ current committee assignments are Committee on the Budget (Ranking Member), Committee on Environment and Public Works (Subcommittee on Clean Air and Nuclear Safety, Subcommittee on Green Jobs and the New Economy, and Subcommittee on Transportation and Infrastructure), Committee on Energy and Natural Resources (Subcommittee on Energy, Subcommittee on National Parks and Subcommittee on Water and Power), Committee on Health, Education, Labor, and Pensions (Subcommittee on Children and Families and Subcommittee on Primary Health and Aging (Ranking Member)), and the Committee on Veterans’ Affairs.

Although Sanders has little record on Hong Kong issues, his positions on issues relevant to Hong Kong’s success give Hong Kong much to be concerned about. If Sanders is elected, Hong Kong will, without a doubt, “feel the Bern”.

A U.S.-China currency war would certainly be detrimental to Hong Kong.

Sanders labels U.S. trade policies as “disastrous” and makes the unsubstantiated claim that trade with China forces American workers to compete against low-wage labour and only serves largely to benefit already wealthy corporations; his website also claims that the U.S. trade deficit with China has led to the loss of over 2 million U.S. manufacturing jobs since 2001. Sanders ignores the benefits to U.S. consumers of lower priced goods, that domestic U.S. manufacturing is often more productive, and higher on the value chain than China manufacturing, and that exports to China creates sales, profits, and jobs at U.S. companies. According to the U.S. – China Business Council, exports to China helped support a wide range of industries including transportation equipment, crop production, computers and electronics, and chemicals, along with export-related jobs in America’s port cities, with forty-two states experienced at least triple-digit export growth to China since 2005, and in 2014, thirty-one states exported more than $1 billion to China.

Sanders’ opposition to trade with China dates from his 1999 vote against granting China “Most Favored Nation” status, and his 2000 vote against Permanent Normal Trade Relations with China that facilitated China (and Taiwan’s) entry into the World Trade Organisation and requires China to adhere to WTO rules, including market access for U.S. companies.

Sanders is a founding member of the Congressional Progressive Caucus, a group of congressmen eager to impose penalties on China as a currency manipulator despite arguments China does no such thing. As The Wall Street Journal recently pointed out, if Zhou Xiaochuan, governor of the People’s Bank of China, is a currency manipulator, then Janet Yellen is an interest-rate manipulator. A U.S.-China currency war would certainly be detrimental to Hong Kong.

Hong Kong is well-positioned to benefit from any FTAs in the region…Unfortunately for Hong Kong, Sanders vehemently objects to the TPP and he joined other progressives…to vote against it

Unusual for the American left, Sanders also states on his website concerns about China’s military spending. According to Sanders, the U.S. “must deter China’s military build-up” and he proposes to do this via sanctions on any individual or country that violates an arms embargo with China, including denial of participation in cooperative research and development, prohibition of ownership and control of any business registered as a manufacturer or exporter of defense articles or services, removal of all licenses relative to dual-use goods or technology, and the prohibition of participation of any foreign military sales. Absent greater specificity, such policies, if implemented, would increase compliance costs for Hong Kong based businesses, and potentially cause them to run afoul of U.S. law.

Trans Pacific Partnership, Free Trade

Although not a signatory to the Trans-Pacific Partnership, according to the Hong Kong Trade Development Council, as an economy where services account for more than 90 per cent of the GDP, Hong Kong is well-positioned to benefit from any FTAs in the region. This is particularly true if these agreements put significant, if not equal, emphasis on comprehensive economic cooperation, including FDI and investment facilitation, on top of merchandise trade liberalisation. The American Chamber of Commerce in Hong Kong recently suggested Hong Kong join the TPP in its submission to the Chief Executive’s Policy Address 2016.

Unfortunately for Hong Kong, Sanders vehemently objects to the TPP and he joined other progressives such as Senator Elizabeth Warren (Democrat – Massachusetts) to vote against it. Among Sanders objections are that the TPP will allow corporations to outsource even more jobs overseas, Wall Street would benefit at the expense of everyone else, and that the TPP has no expiration date, making it virtually impossible to repeal.

In 1998, Sanders co-sponsored a House resolution calling on the president to make the opening of additional Chinese consulates in the US contingent on China allowing the U.S. to open a consulate in Lhasa

Sanders neglects to understand that the TPP has the potential to increase wages, as manufacturing and services jobs shift toward more export-oriented industries, and that increases in foreign investment in the United States usually follow new trade agreements and create high-wage jobs. American financial firms already benefit from market access under existing bilateral and multilateral agreements and operate throughout the TPP markets often from a regional headquarters in Hong Kong. The TPP text debunks the myth that withdrawal is impossible.

Human Rights in China

Sanders is a member of the Congressional Human Rights Caucus though he is not known as a leader on the subject. Like many on the American left in the period after the end of the Cold War, an aversion to American exceptionalism has silenced the voices that fought for human rights behind the Iron Curtain on both the American left and right. In recent years Sanders was a strong advocate to establish relations with Cuba, despite its notorious human rights record.

With regard to China, Sanders has focused his attention on Tibet to the detriment of other human rights issues. In 1998, Sanders co-sponsored a House resolution calling on the president to make the opening of additional Chinese consulates in the US contingent on China allowing the U.S. to open a consulate in Lhasa.

As a senator, Bernie’s co-sponsored legislation condemning the violence by Chinese government in Tibet. Bernie has also co-sponsored a congressional resolution condemning China for its poor human rights record, and is a member of the Congressional Human Rights Caucus.

Although Sanders’ calls on China to “Stop the persecution of all religious practitioners and safeguard fundamental human rights” he mentions only Falun Gong and Tibetans specifically.

Sanders also has praise for China. In a recent Tweet, he praised China’s 14 weeks of maternity leave. Actor James Woods, increasingly outspoken in his political views, responded with a tweet that “China has notoriously killed female infants for population control, you utter moron”.

Hong Kong’s Autonomy

Sanders is silent on Hong Kong autonomy and what U.S. policy should be to ensure the future success of One Country, Two Systems

Despite the attention given to Tibet issues on his website, Sanders is silent on Hong Kong autonomy and what U.S. policy should be to ensure the future success of One Country, Two Systems.

Finance Industry

Sanders proposes a financial transaction tax, despite evidence that a such a tax on capital will make it more expensive for those who require it to invest and result in less investment in the future and smaller economic growth. Although some argue that a financial transaction tax is a smart way to raise revenue and reduce trading that makes markets more volatile, if implemented in the United States it will increase transaction and compliance costs for Hong Kong based traders and potentially lead to pressure on Hong Kong to increase its transaction taxes to U.S. and/or European levels.

Sanders also proposes to break up large financial institutions. Although such a policy might create revenue for service providers such as lawyers, accountants and consultants, ultimately the resulting dislocation in financial industry and job losses would harm Hong Kong’s role as a financial center.

Asia Experience

Sanders is not known for an interest in Asia issues other than his periodic statements of support for human rights in Tibet and his opposition to trade with China and the TPP. A President Sanders would enter office with similar outlook as incumbent President Barack Obama, that is, inward looking and a focus on social spending. It’s hard to imagine President Sanders hosting ten ASEAN leaders at a summit in California the way President Obama will next week.

In fact, Sanders own website exposes his lack of familiarity with the region, conflating China and the TPP even though China is not a signatory: Referring specifically to the 2015 Trans-Pacific Partnership, Bernie has decried trade deals with China as being “designed to protect the interests of the largest multi-national corporations at the expense of workers, consumers, the environment and the foundations of American democracy.

Although many pundits still believe it unlikely that Sanders will win the Democratic nomination or the general election, if remains a competitive candidate in the coming months the candidate whose slogan is “Feel the Bern” can certainly scald Hong Kong if his popularity pushes stakeholders such as other presidential candidates, labour unions or the media to champion some of his policy proposals.

Editors Note: This article was updated on February 15th, 2016 to include the penultimate paragraph about FATCA.

Ross Feingold has extensive experience with international finance, regulatory, and policy issues.

Mr. Feingold worked in Hong Kong for The Royal Bank of Scotland supporting its Asia Sale Program, and was the project manager for the bank’s opening of a new office in Taiwan.He has worked with Deutsche Bank (Hong Kong), J.P. Morgan (Singapore) and international law firm Russin & Vecchi (Taipei), and Jardine Fleming (Taipei).

Mr. Feingold presently serves on the global board and as Asia director of The Association of Americans Resident Overseas, a non-partisan advocacy organization that represents the interests of U.S. citizens living and working abroad. He advises on strategic communications and outreach efforts, and interacts extensively with Asian governments and numerous international organizations. He is admitted to practice law in New York and Washington DC

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BarbiQPork

You neglected to point out that Sanders’ (and Clinton’s) strong support for FATCA (Foreign Accounts Tax Compliance Act) continues to cost HK banks (and every bank worldwide) millions of dollars in compliance costs, which comes out of shareholders’ profits and depositors’ rising fees. FATCA also wreaks havoc on individual Americans and American SMEs, shutting Americans out of banking services and any jobs in which an American has signature authority over a company’s account, thus reducing incentives for inward American investment to Hong Kong. FATCA is a disaster for the rest of the world, with insignificant benefit to the USA. Sanders voted in favor of FATCA twice (once as Representative, once as Senator) and continues to voice support for FATCA as a means to catch so-called “tax cheats”. Clinton supports FATCA even more vociferously than Sanders (it was introduced while she was Secretary of State). Thus, either a Sanders or Clinton presidency will see this toxic law continue, if not made worse, which has a direct effect on Hong Kong.

Any US expat anywhere in the world is voting against his/her own interests by supporting either leading Democratic candidate. (Note, I am a lifelong Democrat, who feels betrayed by my party over FATCA–an entirely Democratic initiative made under Obama–so this is not a partisan memo on my part)

FATCA addendum added – thanks for the great idea and your comment drove us to action.

DoubleTaxed

Sanders is from the party that thinks it ok to inflict upon the countries of the world compliance costs of FATCA. While an estimated $8.7 billion will be recovered to the US IRS over 10 years some estimates of implementation costs by ALL the banks of the world is $200 billion. They don’t care about it.
Plus the US has not (probably can not) pass legislation to provide reciprocity to Hong Kong and other countries. FATCA is a one way street.

Constrast with the Republican platform of repeal of FATCA. Plus Hong Kong based Republicans Overseas has a lawsuit against FATCA that it violates the Constitution on 8 counts.

Any US persons overseas caught up in the byzantine compliance of the overlay 74,000+ pages of the US tax code (that treats with suspicion and extra penalty accounts overseas), should visit The Isaac Brock Society, or Facebook Citizenship Based Taxation or Expatriate Americans Groups.

Sanders is from the party that thinks it ok to inflict upon the
countries of the world compliance costs of FATCA. While an estimated
$8.7 billion will be recovered to the US IRS over 10 years some
estimates of implementation costs by ALL the banks of the world is $200
billion. They don’t care about it.
Plus the US has not (probably
can not) pass legislation to provide reciprocity to Hong Kong and other
countries. FATCA is a one way street.

Constrast with the
Republican platform of repeal of FATCA. Plus Hong Kong based Republicans
Overseas has a lawsuit against FATCA that it violates the Constitution
on 8 counts.

Any US persons overseas caught up in the byzantine
compliance of the overlay 74,000+ pages of the US tax code (that treats
with suspicion and extra penalty accounts overseas), should visit The
Isaac Brock Society, or Facebook Citizenship Based Taxation or
Expatriate Americans Groups.

Tom Johnson

Hilarious to see this partisan GOP mouthpiece alternate between wanting Sanders to bootlick the Chinese on trade issues while trying to nitpick which Chinese human rights abuses Sanders should care about. Feingold clearly doesn’t give a crap about the Tibetans, as Sanders’ support for Tibetans has Feingold all riled up. Feingold is mad that Sanders supports maternity leave for women and quotes faded Hollywood actors to shore up his non-sequitur.

While Sanders is against TPP, it’s pretty funny to see Asia newbie Feingold pretend that Hong Kong should give a damn. First off, the TPP’s main advantage is that it helps to create a bloc of trading nations getting benefits intended to side-step China’s increasingly aggressive efforts to flex its economic and military muscles. In case Feingold forgot, Hong Kong is part of China! Second, does he even read the news? Trump, Cruz and Clinton all oppose the TPP as well. For that matter, Trump keeps talking about the trade war he wants to get started up by hitting the Chinese manufacturers with HUUUUUUUUUUUUGE tariffs. That’s going to suck a lot more for Hong Kong than Sanders being one of many candidates who doesn’t like the TPP.

And the notion that people will “invest less” because of taxes on hedge funds and investment institutions is nuts. Does Feingold think we’re stupid enough to put money in banks given the abyssmal returns? We’ll still invest, and most consumers will be glad to see the middleman institutions reined in a bit after decades of gaming the system to take money from our middle class. Did Feingold skip his Econ 101 classes?

While he gets Sanders’ position on FATCA right on same-country-safe-harbor, Feingold glosses over a very significant pro-expat position — Sanders also strongly supports residence-based taxation (“RBT”), repeatedly ridiculing the notion that only the U.S. and Eritrea use citizenship-based taxation. Every single GOP candidate does not give a damn for the Americans living overseas, and to the extent that any of them have a position on FATCA, it’s been in favor of US-resident wealthy cash stashers who have hidden their money in accounts and structures overseas beyond the means of normal middle-class Americans. As far as I can tell, no Republicans in Congress have taken even the basic step of proposing legislation that would exempt any U.S. citizens from the FATCA requirements or require any accountability from the banks.

Amazing to see the Harbour Times let this Republican dude just rub one out on its pages.